San Francisco's budget next year would for the first time exceed $6 billion under a proposed spending plan unveiled Thursday by Mayor Gavin Newsom, which he called a "back to basics" budget.

Newsom said his $6.06 billion budget for the 2007-08 fiscal year, which represents a 5.4 percent increase from the current year and a more than $1 billion increase from the first budget he balanced after taking office in 2004, addresses pothole-ridden streets and panhandling, a troubled public transportation system and a shortage of police officers.

In a meeting he requested with The Chronicle's editorial board, Newsom offered highlights of his proposed budget, which by city law must be submitted to the Board of Supervisors today. The final budget must be approved by the board by July 17.

"It's a get-back-to-basics budget, that's our message," Newsom said.

There also is a proposal to spend $5 million in general fund money to help kick off his plan to restore public housing in the city through Hope SF, his local initiative modeled on a national program that has largely lost its funding under the Bush administration. Newsom said the money could be used to leverage millions -- including a $95 million bond issue to replace hundreds of units of decrepit housing.

He also wants to spend $700,000 on his idea to establish a new community court that would prosecute quality-of-life offenses like public drunkenness, graffiti and panhandling and direct people to services.

Though he did not provide a copy of the proposed budget to reporters, Newsom said the overall spending increase is supported by rising property and payroll tax revenue -- and noted it is less than spending increases seen at the state and federal levels.

"It's defensible," Newsom said of the growth.

While Newsom's previous three budgets, after some debate in City Hall, ultimately received unanimous approval from the board, this year's battle comes amid the mayor's re-election campaign and increasingly contentious relations between Newsom and his rival Supervisor Chris Daly. Daly is the chairman of the board's Budget and Finance Committee and has said he might run for mayor against Newsom in November.

At the center of the battle is Newsom's refusal to spend $33 million the board recently appropriated at the close of the current fiscal year to acquire, construct and rehabilitate affordable housing for families, seniors and homeless youth -- legislation proposed by Daly.

On Thursday, Daly said his only question about the mayor's proposed budget is whether Newsom will spend any of that money.

"The big question is whether he stole the affordable housing money to fund his priorities," Daly said. "If he backs the $33 million out, I will say, 'Stop! Thief!' "

Daly said he was not impressed by Newsom's stated budget priorities.

"I don't comment about his smoke and mirrors," Daly said, who had not yet seen the actual budget. "I'm only interested in his numbers."

Newsom said his budget, which balances a projected $25.4 million deficit, includes the elimination of a workers' comp clinic and a reduction in beds for mentally ill patients at San Francisco General Hospital -- two cuts that will likely prove to be controversial. He said there will not be major fee increases for city services.

Last year, Newsom's critics accused him of pandering to labor unions after his budget carried $286 million in new payroll costs that he said mostly fulfilled commitments his administration made to city workers who did without salary increases in past years when the city faced tough economic times.

Newsom is scheduled to formally announce his budget today during a speech at the city's new 311 call center headquarters -- a new telephone hot line residents can use to get free, round-the-clock information about all nonemergency services in the city.

Though he offered few details, Newsom said there would be $217.5 million set aside for housing needs, $56.7 million for crime prevention, that the number of city-funded homeless outreach workers would jump from 18 to 36 and that there would be money to pay for five new Police Academy classes.

There would be 35 additional custodians for city parks and 15 more gardeners. There also is funding proposed for 12 new park patrol officers to monitor Golden Gate Park, where Newsom and others have complained about the growing number of homeless encampments.

The mayor said he hopes to improve Muni's lagging on-time performance by adding 135 new bus and cable car operators and 18 new supervisors to the fleet. His budget, he said, also contains funding for environmentally friendly hybrid buses, as well as money to complete the NextBus system, an automated tracking program that lets riders know when the next bus is scheduled to arrive at certain stops. San Francisco has been experimenting with the program for nearly a decade.

Newsom also said there would be $5.4 million more for street repair projects, part of a promise the mayor made in his State of the City speech last year to get "back to basics" and focus on such issues as potholes and clean streets. Officials say the $36.4 million dedicated to street repairs in the proposed budget would meet the city's annual paving needs.